How not to run a business (Part 8): Stock and Incentive edition
While it’s great that employers want to reward employees and give incentives to stay, there is the correct way and there is the wrong way. Let’s explore.
Don’t offer tiny stock grants with huge vesting schedules and cliffs
If you’re planning to offer a stock grants as ‘stay’ incentives, make it sizable. Stock programs with vesting schedules are a good thing, but not grants with tiny amounts of shares. First, it’s a waste of paperwork to give out less than $10k in equivalent shares (vested over 4 years) in company stock both for the HR team and for the receiving employee. You’ll have your team spending time on managing all of these tiny grants with no benefit to anyone. Second, most employees won’t hesitate to walk away from such grants before the vesting period ends which means even more paperwork to clean it up after the employee has left. Employees won’t wait 12 months just to get another $1-2k when they can likely pick up a 5-10% raise (and possibly even a sign-on bonus) by changing jobs.
If you want to give an incentive to employees so that they stay with your company, approve grant sizes that matter. More specifically, grant sizes that are higher than an equivalent raise. Make it worth your employee to want to worry about. For example, grant a size equivalent to 1 year of salary (at the then current stock price) with a 4 year vesting schedule. If an employee sees they’re going to get 1/4 of their salary each year for the next 4 years, that’s definitely an incentive to stay. If they don’t stay, you don’t pay. Assuming the employee is a high performer and highly valued, it is worth it when they do stay. That’s the entire point of the grant. However, issuing a grant that, at best, offers the employee $1-3k after taxes each year offers not even the best performer an incentive to stay. After all, you do want this employee to stay, right? Most great employees can easily make up such a tiny amount left behind by moving to a new job with a new company. Most people would have no problems walking away from a tiny dollar amount for a new job offer. Again, this leaves your existing employees to clean up the mess left over from the tiny little unvested grants. Note that it’s the same amount of paperwork whether you grant 1 share or thousands.
In other words, grant stock incentive sizes that make sense for all involved or choose a different incentive vehicle altogether. While you may think giving stock grants is a positive thing, employees generally don’t because of the downsides of vesting schedules and cliffs, the hassles of taxes (it will probably cost the employee more to hire a tax consultant than the bonus is worth) and when it’s too small it’s not worth the employee’s time. Be very careful when using this incentive vehicle.
Don’t send the wrong message to your employees by using the wrong incentives
In the case above with stock, you have to consider what such a small grant size says to the employee. If you give an employee a pittance grant, you’ve essentially just told them, “You’re worth $1-2k a year extra” (once they do the math). That, in many cases (especially in California), is less than the average raise. That doesn’t, in any way, impart confidence that the employee is valued… and that’s exactly what a pittance grant says. It’s definitely not the right message to send. Yes, extra money is always a good thing, but not when it’s wrapped (er.. trapped) in the wrong incentive vehicle or if it’s the wrong dollar amount.
Keep in mind that for the employee it’s all about when they actually see the money. Trapping the money behind vesting schedules and vesting cliffs is tantamount to dangling a carrot from a stick just out of reach (for a year) and then only giving them 1/4 of that carrot after chasing it for a year. If you expect the employee to wait a year to get 1/4 of a baby carrot, it better be a damned good tasting baby carrot (e.g., a substantial amount of money actually worth waiting for).
From a monetary perspective alone, $1-2k extra a year can be easily handed to the employee in many other ways. You can label the extra as a bonus, you can label it as a ‘great job’ thank you, you can hand them a live check with a personal thank you or you can buy them an iPad as a gift.
Each of these suggested alternative incentives sends the correct message. Handing someone an iPad is a whole lot more satisfying of a bonus than handing them the quagmire of pittance RSUs. In stock plans with long term vesting schedules, vesting cliffs, stock price uncertainties, waiting periods and tax disincentives, it’s a quagmire of a bonus system for the employee to navigate only to secure $1k. Don’t use stock grants to hand out $1-2k a year bonuses. Using this incentive vehicle sends the absolute wrong message to your employees, can damage employee self-worth and ultimately damage your reputation as a respectable company. Ultimately, if the employee is left with nothing for a year and then has to wait 4 years to ultimately get maybe $10k gross and suffer huge tax liabilities in the process, that’s the wrong message to send.
So, always use the correct incentive vehicles to send a positive message to your employees to keep them on board. Using the wrong vehicle in the wrong way not only plants the seed of dissatisfaction, it can lead to the employee walking away entirely.
Don’t flaunt your sales team’s wins to your non-sales employees
Your sales team is important to the success of your company. It’s also great that your sales team members, or at least some of them, are doing well to bring in those great deals. On the other hand, many companies make the mistake of continually rewarding the most outstanding sales team members with trips, gifts, dinners and other niceties. Keep this information firmly within your sales team. Do not share this information with non-sales departments.
It’s very easy for the other departments to see the sales team as being the team with all the special benefits. This can make the other teams seem as if they are being left out of the loop. Your operations team, for example, usually has staff working 24/7/365 to make sure things are working. Yet, your sales team is being flown around the globe on sales team kick-offs. This sends the wrong message to other teams. If you are going to give incentives to your sales teams, either keep it away from your other teams or figure out a way (i.e., via winning an internal lottery) to include other team members in these wins.
Again, it’s important to understand that the sales team, while important to new business and renewals, isn’t the only team keeping your business afloat. All teams need to be supported, given incentives and given the opportunity to participate in travel events when available.
Do allow employees to participate in company sponsored events
If your company is planning to do trade shows such as Dreamforce or possibly even creation of your own company annual event, allow and encourage employees from all departments to participate. Doing the same job day after day, month after month is hard to do year in and out. Breaking the monotony of the same ole same ole will help reinvigorate employees when they do get back to their job. Allowing employees to do something different for a couple of days does help re-energize people to do their best jobs. It also encourages employees to meet and work with other employees outside of their team that they otherwise would not. This allows for a much closer knit company, especially when the employee does end up working with that person they met earlier.
Don’t be ambiguous or vague about your incentive programs and make sure they are fair to all teams
If you plan to offer such incentives as RSUs, stock options, bonus plans, merit-based trips, etc, document them. Document exactly how they work, who is eligible and how each employee can become eligible. If your programs only include certain departments, make certain that when other departments become aware (and they will) that you offer compensating alternatives to those other departments.
For example, if your sales team members receive an end-of-year trip to the Bahamas for the best sales numbers, then your finance team should, likewise, be offered some kind of off-site vehicle for the finance team members who consecutively kept their DSOs down that year. Offering something to one team and not others clearly smacks of favoritism. When it is not documented clearly, this causes more friction between teams than it solves. Better, if teams are offered grand incentives, then use a lottery to allow other departments to participate in it. So, for each sales team member who wins a trip, they can bring a member from another team along and that person is determined via a lottery. Again, this should all be documented fully so there is no question about either individual or team incentive programs.
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Shopping Frustration: When coupon codes don’t work
Nothing is more frustrating during online shopping than when e-tailers send out a coupon code for a one day sale that doesn’t work. I have to wonder, are these sites just stupid, clueless or technically inept? Let’x explore.
Holiday Shopping Spree
If you’re like me, I tend to shop for things when people send me coupon codes. Specifically, I shop when things are wearing out. I try to make sure these purchase times match up when coupon codes are available. So, I like to wait for sale days like Memorial Day, President’s Day or, like today, Labor Day. So, I’m happy when companies where I like to shop send me a 20% or 30% off coupon. I generally like to take advantage of these deals because they don’t appear that frequently and I can shop for clothes that are wearing out.
Clickable Ad Banners in Email
Unfortunately, many of these e-tail sites are so inept or mismanaged that they email out the code but they forget to activate the code. Sometimes they deactivate it too early. Worse, they send an email with a big clickable banner ad describing this ‘Sale’ that, when you click, takes you to their home page and not to the sale items that apply to the code. This action leaves you wondering what the heck is actually on sale? One word comes to mind: inept. Retailers, this is a seriously stupid practice. If you send out an email that you’re having a 20% off sale, a click should immediately take you to the sales item(s). Don’t make your customers guess what’s on sale. In the case where I am taken to the front page, I close the browser, delete the email and move on. Sorry, you’ve just lost a sale and I simply won’t shop there. I know I’m not alone in this. A lot of people fill their carts and either abandon the cart or clear it out because of stupid things like coupon codes that don’t work.
Coupon Codes that Don’t Work
I’ve had many times where some company sends me a coupon code that when you type it into the cart and click ‘Apply’, the message says ‘This coupon is not valid’ or ‘This coupon does not apply to the items in your cart’. This goes back to the above issue. If you’re planning to issue a coupon code and spend the time and effort to email your email list with this code, you damned well better test that code to make sure it works and you damned well better make sure the customers know to which items the code applies. Don’t make your customers guess. Additionally, for 24 hour sales, you should make also sure that code works until midnight. And by this I mean, make sure it works until midnight of the customer’s timezone, not just your company’s timezone. That coupon should not expire at midnight your company’s timezone time as that could be midday in some locales. The code should expire at midnight wherever your shopper resides or better, expire it the following day sometime during the day to prevent expiration before the day is over for every customer and also lets late customers take advantage. After all, isn’t the idea behind a coupon code to get people into your site to purchase?
Customers walking away
Making stupid moves like not activating coupons, deactivating them early or making your customers guess as to what merchandise the coupon applies is just a stupid practice. You probably think I’m talking about small mom-and-pop shops here. No, these are well known well respected companies that are making these most basic mistakes, like Jockey, Tommy Bahama and Zagg.
Nothing is more frustrating than filling up your cart with merchandise expecting to use a coupon code only to find that it doesn’t work. Or, worse, not finding the merchandise to which the sale or coupon applies. In these cases, I empty the cart, close the browser window and delete the email. If these companies do this more than once, I remove myself from their email list as it’s quite clear that these companies do not have their act together. Which, if you think about it, is completely odd. These are retailers in business to make money. If you’re planning to offer a sale that uses a coupon code and that code doesn’t work, do you really think people are going to pay full price anyway? No. Selling your merchandise is your bread and butter and if you want people to buy your stuff, then you need to make sure your email ads reflect the reality of your site. If it doesn’t work, then you have even more serious issues on your hands, not the least of which might be considered fraud.
Amazon Better?
I just don’t understand this practice. This is why Amazon is kicking butt. With Prime, you get 2 day shipping included and the best price without hassling with coupon codes. Sure, you might be able to find it slightly cheaper at some mom-and-pop shop. But, the hassle of setting up a new account and dealing with yet more email that can’t do it right outweighs the few pennies of savings you might get from that mom-and-pop shop. So, I always find myself back at Amazon buying, at least for hassle-free purchasing. I don’t want to deal with coupon codes that don’t work, sites that don’t specify what’s on sale or silly stupid problems like this.
For those sites that do this, fix your sites or lose the sale and be trampled by Amazon. It’s quite simple.
How not to run a business (Part 1) — Don’ts
While there are tons of articles out there describing exactly what you need to do to start and operate a business, here are tips on what not to do when operating your business. I come from a background of years working in IT and, thus, this article is born from that perspective. Please view the index page to view all parts in this series.
Don’t treat your customers as burdens
So many businesses see only dollar signs next to a customer’s account. They’re more than dollars, they are your livelihood. Without them, you don’t have a business. Always treat your customers with respect and never as a burden. With that said, some people are difficult to manage in their mannerisms, manners, speech or phone etiquette. These types of people can be difficult. If you know that you cannot work with a given customer or client based on their behaviors, you may have to let them go as a customer. There is nothing that says you have to continue to do business with everyone that comes to you for services. If the client cannot show your business and your staff the same level of courtesy, respect and professionalism that you show them, then they don’t deserve to use your products or services.
On the other hand, your staff should always remain professional, courteous and friendly at all times. Word gets around quickly when your people are rude, improper or treat customers disrespectfully. Don’t do it and make sure your employees don’t.
Don’t burn your employees out
It’s very easy to lose sight of what your employees are doing day to day. If all you are seeing is the work being done, but you aren’t understanding how that work is getting done or by whom, you need to stop and smell the roses. In other words, find out what they are doing. Don’t assume that you have enough employees simply because the work is getting done. What you may not see is that your employees could be working after hours and on weekends to get the work done that couldn’t be done on shift. This is both unfair to your employees and causes burnout. Eventually, the employee will leave and you’ll be forced to hire and train someone new.
You’ll also find that after hiring someone new, the work output dramatically drops because the new person won’t carry the same work load as the person who left. Don’t blame the new hire, don’t chastise them and don’t expect the same level of work. You’ll only end up with a revolving door. If your ex-employee was doing the work of two, you need to find that out and hire the appropriate amount of staff to cover the expected workload. You should never expect the same level of work output from a new hire, especially if the person who left was using their own time to finish the work.
Treating your employees fairly and understanding their workload is how you get better productivity. Cracking the whip and expecting immediate results only pushes other work aside for your fire drill. As more and more fire drills result, the less and less other work gets done. This then means the employee is backlogged with some work that will never get done. If getting all work done is important, make sure that you understand the ramifications of a fire drill before you start it.
Additionally, you may have spent a fair amount of time recruiting the talent to your business. If you’ve got talented employees doing a bang-up job, but they are way over worked, they’re eventually going to leave. You don’t want to have to replace that brain trust. It’s expensive, time consuming and can leave your business vulnerable until you find someone and get them trained. It’s cheaper to keep your existing talent by treating them right the first time out. Keeping track of and managing your employees’ burn level goes a long way towards employee retention.
Do not categorize every customer issue as a fire drill
This goes back to the point above. Every customer issue isn’t a fire drill. Be professional, be courteous, but most of all, be realistic with your customers. Don’t promise immediate results when it’s not possible. Doing so throws employees into fire drill mode and other work gets pushed aside. Fire drills result in much lost productivity. Learn to triage and manage these customer situations appropriately.
Don’t expect professional results from fire drill mode
When employees go into ‘fire drill’ mode, all productivity stops. That is, all productivity stops for each employee consumed by the fire drill. The only thing that a fire drill employee is focused on is in fixing what caused the fire drill whether or not they have the tools to do so. Worse, as employees jump into fire drill mode, they also enter the get-it-done-as-fast-as-possible mode. This mode is problematic on many levels. It can leave the issue only partially resolved or temporarily resolved. This means that someone will have to go back later and fix the problem properly and permanently.
Moving too fast can cause mistakes or lead to even bigger problems later. Moving too fast can bypass rational and critical thinking. Moving too fast can halt logic thought processes and prevent people from seeing the bigger picture. These are all important aspects to realize of fire drills. For example, is the problem just for a single customer or is it impacting all customers? Is the problem something that the product or service caused, is it caused by the customer interaction or is it something introduced by a third party vendor? Getting thrown into fire drill mode keeps some of these thought processes from materializing and, instead, employees tend to put blinders on instead of rationally thinking through the entire issue from top to bottom.
Fire drills burn people out rapidly. Eventually, employees get fed up with the fire drill mode and they leave the company. Don’t expect to keep employees for longer than a year or two if your entire business runs on fire drills daily. Note, successful businesses do not operate in fire drill mode all of the time. Yes, fire drills happen, but not all of the time. Treating every issue as a fire drill leads employees to feel unproductive and eventually they burn out and leave.
Don’t expect perfection from employees
We are all human and we are all fallible. Running a business, you have to expect occasional mishaps. That’s not to say that you can’t strive for your employees to reduce mistakes. But, it does mean that you need to set your expectations accordingly to avoid thinking that perfection is the way the company should run.
On the flip side, do treat your employees with proper and necessary fringe benefits. For your business to be considered on Forbes top 100 best places to work, you need to offer a whole lot of perks to your employees. Perks can be costly, but happy employees keep the productivity flowing. Unhappy and dissatisfied employees do the minimum and go home. Employees that are happy to work for your company will turn in a lot more carefully completed work than employees who are dissatisfied or are getting burned out.
Don’t play games with your website
If you intend to do business on the Internet (and who doesn’t at this point?), your web site is the new storefront. It shows off your business and how it works. It is the single most important portal for both your customers and prospects. Without a solid well designed web site, don’t expect high quality traffic or even the right traffic. This means, let professional design firms design your site tuned to the correct keywords. Don’t build the web site yourself from scratch (unless you happen to also be a well known web designer). Let professionals do this work and provide your site with a fresh look. Additionally, trust your web designer. Don’t think you know better than your web designers (unless you happen to have a degree in commercial art). Yes, flaws in the way something works on the site, these need to be corrected. For the look and feel, trust that they know what they are doing. If you are uncertain of a certain image, flow or feature on your web site, do an A/B test (your idea vs the designers’s idea) to find out which one your visitors like better. Visitors always speak loader than you. Treat your visitors with the respect they deserve. Don’t assume that because it’s how you want it that it’s the correct move. Note that that goes for everything in your business, not just websites.
Additionally, once you establish a web site with reasonbly high ranking in Google, don’t up and change it just because ‘it’s old’. Don’t do this unless you are absolutely certain you know what you are doing. If you roll the site out incorrectly, you can easily lose all page rankings you have in Google. If your intent is to target new keywords, then maybe that’s what you want. But, if you had a page 1 or page 2 ranking, by changing key words and content incorrectly, you can expect to drop down to the 20-50 page area (or lower). This is immediately damaging to any business. Note, page rankings move down far faster than move up. So, you’ll pretty much lose your rankings overnight, but your new keywords might take a year or longer to get even close to page 4. You’ve lost a lot of ground and you’ve lost a lot of visitors because your new site is now ranked very low. You can always pay for AdWords to help your business, but pay-per-click is very costly and may not help your page rankings in any substantial way.
Don’t use content management systems for your web site
I know, I know. A lot of people are using WordPress for their home pages. This is way overkill for a home site. Why? First, your content doesn’t change that often on your home site. It’s mostly static. WordPress and other content management systems are designed for adding new content often and rapidly (just like this very blog article you are reading). Corporate web sites don’t change frequently enough to justify all that’s necessary to run a CMS (i.e., Linux, Apache, MySQL and PHP for starters). On top of that, WordPress requires you to build the graphics inside of a specially designed theme which requires specialized coding knowledge. Additionally, for Linux, Apache, MySQL and PHP, someone will also need to understand all of these technologies for when things break and when redundancy is required. This means hiring someone knowledgeable to manage the CMS site, not to mention someone who’s knowledgable with WordPress management.
Second, there’s page delivery speed. For each additional technology layer you add, there’s a performance hit to deliver that page to the browser. The slower the page load, the lower the Google page ranking. Statically designed web sites are the fastest to load. Why? No databases to pull data from, no PHP to interpret and process commands, no extra layers of networks to pull data through, etc. The pages and content are immediately there to download rapidly. Ultimately, a CMS is simply delivering an HTML page to the browser. So does a static web site. The less layers involved, the faster a page can deliver. The faster the delivery, the higher the page ranking. Of course, you can also throw super fast hardware and caching mechanisms in front of your CMS to help speed up delivery, but that can cause other issues for some types of content and, at the same time, cost you more money. The only downside to static web sites is management and deployment. However, tools like Dreamweaver can solve some of these deployment issues. It’s also far easier to hire someone knowledgeable about HTML and Apache alone than it is to find someone who additionally understands PHP and MySQL databases and permissions, let alone WordPress.
Don’t send mixed messages to your customers and prospects
The worst thing you can do is have a muddy browsing and sales experience. Customers want to know what things cost and what they will get in return for that money they spend with you. If you don’t have a clear and concise list of your products or services, then define them before ever allowing a salesperson on the phone. Mixed messages are the quickest way to lose prospects before getting to stage one in the sales process. Clearly define what you offer before getting any prospect on the phone. Additionally, mixed messages can come from different sales people also. For example, based on commission rates, one sales person might offer once price while another offers another. Keep your sales people consistent on pricing. If a prospect calls and is given pricing, make sure that pricing is documented in a quote somewhere. If the prospect calls back, even a different representative who answers the phone can find the pricing they were given.
Don’t overhire
This is a huge problem in Startups. Startup companies tend to overhire in places like sales and under hire in critical technical positions needed to support those sales properly. So, you might have 50 sales people all closing deals, but you have one or two operations people to enable and train those 50 (or more) new customers each month. This goes back to, don’t burn your employees out. Lopsided hiring is a phenomena that upper management rarely sees or chooses to ignore, but continues to be a problem in nearly every startup I’ve seen.
Don’t pay out commissions before receiving customer payment
We all know that closing a deal is great. However, the trap that many startups fall into is paying out commissions on the close of the deal rather than after the customer’s check has cleared. This is a problem for so many reasons. First, it allows your sales staff to game your commission system by finding any deal to close and closing it even if it never has hope of actual payment. This means they will always get their commission, but new the customer never actually makes any payment. Second, you’ve paid out commission to the salesperson, but you’ve never collected a dime from the customer. Don’t do this. Always pay out commissions only after the customer’s check has cleared the bank and only based on the length of the term only after the payment is received. If it’s a 12 month deal paid monthly, pay the employee commissions after receipt of payment by the customer and only pay the sales person on what the customer has paid. If it’s a 10% commission, they will get their 10% of that monthly check after the check has arrived and cleared. Never pay any commissions before the check clears. Never pay out the full commission payment on the deal until all customer monies on that contract have been collected.
Paying commissions in this way does several things at once. It forces the salesperson to make sure the payment is properly received, it forces the salesperson to accurately document the contract to get the correct payment amount from the customer, it prevents paying out commissions without receiving payment by the customer first (which means you aren’t dipping into cash reserves to make payroll), it reduces the amount of work necessary by your receivables person, it prevents claw backs through salary reduction of future pay checks from sales persons if deals fall through after-the-fact, and it just plain makes good business sense. Running your sales department’s commission program based solely on when deal closes is just ripe for major cash flow problems.
You know, you’d think this specific Don’t would be a no-brainer in the business world. In fact, it isn’t and I don’t know why that is. I’ve worked for multiple startups that have chosen this money-burning commission approach. I know, some people have said, “Other startups do it this way”. This is a non-argument and offers no justification for this stupid practice. This rationalization also doesn’t make it sane for your business or the bottom line. It just means the insanity runs deep in other companies. Because another business chooses a high cash burn approach to their sales operations doesn’t mean you need to follow that same cash burn approach. Instead, save that money and invest it places that bring money in rather than lose it. Your sales people don’t need to become millionaires off of bad commission practices. Sure, you can use claw backs to get the money back, but only if the sales person is still working for you. It doesn’t work if the employee has quit and left with money in hand.
Don’t let your sales people promise things that cannot be delivered
Your sales people are primarily working for their commissions. That’s why they are sales people. Once you acknowledge this fact, you can do the things to protect your business from dire sales mistakes. Basically, your sales people are looking for 10% of that million dollar deal. They are not concerned whether your product or service actually is capable of doing what they have sold. Overselling is one of the biggest problems that any organization faces, especially growing startups that have little experience. It takes work, training and proper management to keep this problem in check. Don’t turn a blind eye to this part of your business. Yes, your sales people do bring in the business, but they need to bring in the business based on what is currently offered, not what can be built. This goes back to fire drills. If your sales people are constantly selling vapor products, your business will always be in fire drill mode trying to build something a sales person has promised. Don’t get into this mode or you’ll never get out of it.
When a sales person sells something that doesn’t exist, their commissions should be eliminated for that sale. This immediately deters sales persons from selling non-existent features (even if it’s part of a larger deal). If even part of the product doesn’t exist, neither does their commission on that sale. Commissions are like rewards. Don’t reward your sales people for promising things that are not possible and then rushing to try and fulfill that promise by building something really fast ‘to cover the promise’. This is a bad bad business practice to fall into.
Don’t play games with the books
With Sarbanes-Oxley in play, it’s rather difficult to do… especially in public companies. However, in private companies, all bets are off. If you (or any of your staff) play games with the books, you may never be able to recover from this if you intend to IPO. The quickest way to tank your company is by playing games with the books. It’s pretty simple, hire an accountant, a CPA or someone who’s honest and is willing to do the right thing. At the same time, keep close tabs on your books (payments in, out and general ledger). If you are a C-level exec, don’t use the company coffers as your own personal bank account. While this is extremely tempting, unless you intend for the company to close its doors at some point, don’t do this.
Don’t hop around trying to find the next big idea
It’s great to explore new things, but don’t abandon your tried and true services thinking you have the next big thing. If you have something that’s selling well, keep it in play. Don’t get rid of it simply because you think you have a new idea that is better. Make sure you market test all new ideas before you dump services in replacement for that new idea. You may have dumped your bread and butter for an idea that doesn’t work. Your customers will tell you that really quick.
Don’t rely on self-service business models to sustain a large corporation
Self-service is an adjunct to your business and is not intended to be used to sustain the business itself. If you plan to be in business and sell business-to-business services, don’t expect self-service pay-by-credit-card services to win over large corporations. First, most corporations don’t (and can’t) pay by credit cards and, instead, they prefer net 30, 45, 60 or 90 day terms. Credit cards are almost always intended for small transactions, usually under $1000. Although, some consumer cards allow charges up to $3-4k. Some business cards can go even higher. Yes, some cards like the government P-cards have high limits, but most cards don’t. For the most part, though, credit cards are intended primarily for small transactions. If you are looking for $30k-$1mil contracts, cards are not really the place for this size of transaction. You will need salespeople, you need to extend credit and set up payment terms and you need to hire a finance team to send invoices and collect and book payments.
Second, big corporations expect some level of spoon feeding with regards to the sales and support processes. Expect to assign salespeople to corporations as single points of contact. Corporations expect to talk to the same salesperson each and every time they call. If your sales people change constantly, be sure to do proper turnover and have your new sales people contact those corporations explaining the transition. If you prefer not to assign salespeople to accounts, you may do more harm than good for your business, so don’t do this. Corporations want to feel like their accounts are being handled properly. For the amount of money that a corporation is spending on their contract to your business, this is the least you can do to secure their peace of mind. This goes back to treating businesses and people with respect and courtesy.
Don’t think email invoices alone suffice as for notification of outstanding debt
Email invoices, while convenient, are not always admissible in court. Always send a paper bill for second notices to pay. Yes, this means printing and mailing paper invoices, but that’s just one cost of doing business. Expect to incur this cost.
Don’t think your employees know how to act
Write an employee handbook. Not only is this book a great reference for how to act, how to dress, how to conduct business and simple business etiquette information, it is also a good place to set expectations so when you do have to let someone go, you have a document that states unacceptable conduct. You can also state things such as ‘at will’ terms so that employees know exactly where they stand with their employment with you. Employee handbooks are good places to keep all kinds of information not otherwise easily documented. Sure, you can use a Wiki or other digital media (PDF) for this information, but printing this document to paper and placing it on every employee’s desk with a page to ‘read and sign’ means that at least they cracked open the book enough to read and sign the signature page. Digital documents are not always enough for this. This is a way to protect your business from employee issues when you need to let someone go for inappropriate behavior or when performance issues are at work.
Don’t become fascist about the use of electronic devices
Employees carry iPhones, iPads and portable electronic devices. They’re going to carry them whether you like it or not. It’s a way of life today. You’re not going to change that behavior by mandating a no-cellphone policy in the office. People rely on cell phones for critical personal communications. Don’t expect that you can take away cell phone privileges from them and they’ll be happy working for you. This goes back to perks. Let that be a perk for your employees. You can mandate in the employee handbook (discussed just above) about over usage of devices. Basically, let employees exercise common sense on usage (for example, on breaks, at lunch time, etc). But, if it consumes their day and they’re not productive, that’s a problem that needs to be discussed and addressed.
Some employees also like to listen to music while working, so allowing this is also a perk. If an employee is more productive while listening to music, let them listen. If it allows them to tune out other office noises such as other phone conversations, ringing phones, typing, printer noises and other distracting office sounds, all the better. Of course, if the person happens to be the receptionist, use of headphones may not be an option. Note that anything that calms an employee, let’s them remain happy at work and helps them to concentrate is never a bad thing.
Don’t expect people to give up their weekends for your business
This goes back to burning employees out. If you have so much work that one person cannot get the job done or it requires weekend work to get things done, expect to offer extra salary or comp time. Comp time costs you nothing additional. It’s a straight trade. One weekend day for one weekday off. Don’t expect your employees to work 6-7 days on a 5 day a week salary. Eventually, you may find yourself in a lawsuit for backpay. Don’t do it.
Don’t expect technology to solve every problem
Technology is made by humans. It is, therefore, fallible. It has bugs, it crashes, it doesn’t always work as expected. It doesn’t matter if the software is from your developers or from Apple. Nothing is perfect, expect that it will become a problem at some point. This goes back to fire drills above. Take failure in stride and work through it. Don’t pressure your employees for 5 minute fixes when things go wrong. Let the employees work through the issue properly. The question is, do you want it done right or do you want it done fast? Fast may get you a fix, but it may not be a fix that you’ll ultimately like several days later. Giving enough breathing room to let the technical employees work through a proper fix is critical to ensure proper resolution to problems. Expecting fast fixes only leads to more problems later. This even goes for writing code. Pressing to get software releases out the door ‘fast’, especially if you are a software company, is the only real way to tank your business. If you’re a software business, your brand is built on quality, not quantity. You want your software to work as expected. Rushing to get software out the door, more often than not, leads to failure somewhere along the way for someone. It means your developers have missed critical edge cases that can make the difference between being known for mediocre software and being known for high quality software.
If you think that there’s a way to write speedy software that’s high quality, you’ve deluded yourself. Quality software comes only from producing code that covers 98-99% of every edge case out there and that simply takes time to produce. Basically, this requires bulletproofing the software so that no matter how a user may use the software that it always does what’s expected. Increasing speed of software delivery reduces the ability to test edge cases leaving dangling code that doesn’t always do the correct thing under error conditions. This means the code could run wild, do the wrong thing or, worst case, corrupt data irrevocably. This situation puts technical staff in fire drill mode. Again, you cannot run your business in constant fire drill mode. You hired your technical staff to write high quality code, let them. Yes, by all means set delivery dates, but if a feature is too complex for a release, pull it and release it later. Don’t rush them to get that feature into any specific release.
Don’t let the sales team drive your business
Your sales department is your front end the public. It’s how you sell and do business. But, it is not what drives your business ahead. Your products and services drive your business. The solutions that you create are what become the face of what your business is and does. As an entrepreneur, you may have forgotten that the reason you went into business is to solve a problem. You wrote a piece of software or designed a product to solve a business problem, perhaps even for yourself. Then, you realized you could sell that solution to many different people. It’s the solution that drives the business, not your sales team. Basically, your technical team’s ability to deliver a functioning solution is what matters. The sales team is irrelevant in this equation other than the fact that they answer the phone, make the sale and take payment. Far too many businesses rely on the sales department to drive their business forward. This is the wrong approach and uses wrong thinking. Sure, the sales team is the one reaching out to prospects and locating interested new parties. That’s the sales team’s job. But, when sales begins selling a square peg to fit a round hole that’s where problems begin. This goes back to overselling. The solution is what sells, not the sales team. The sales team is the mouthpiece for the solution, not the other way around. So, the sales team must be trained to sell what is there, not what isn’t. It is not the sales team’s job to make up new features or imply that a feature a customer may be looking for exists. It’s the sales team’s job to understand the solution offered and find prospects where that solution fits their problem.
In this goal, always have a technical person who knows the limits of the solution on every sales call. They are the voice of clarity to keep the sales team from overselling. The technical person can step in and say, “That’s not exactly correct, our product doesn’t do X yet”. This sets customer expectations. However, if X feature is important, it should be added to the list of new features to be added into a future release.
Your business and you
As the owner and/or CEO of your business, you are the champion of your business. Only you can do the right thing for your business. Stop, think and use common sense. Rushing employees to get things done fast is not the answer. Slow down the pace. Let the employees catch up and catch their breath. Let them finish critical projects. If you’re consistently compressing time lines, some tasks will never get done. Compressed time lines are usually driven by customers and this, in turn, is usually driven by a salesperson over promising. These are all practices that must be tempered. Setting the correct pace for your business is the only way your business will succeed. Too fast a pace and your business will never be known for quality. Too slow and the competition will outdo you. Critical, of course, to your business is having creative thinkers on your team. You need a constant flow of new ideas to keep the business fresh and keep your products and services new and innovative. Without critical thinkers producing new fresh ideas, your business will keep wrapping pretty new bows on old ideas. Keep your old ideas the way they are. Don’t wrap pretty new bows into them. Your customers will appreciate that you respect them. Wrapping pretty new bows on old ideas can be insulting to old customers if you’re trying to play it off as a new service. This is the quickest way to lose customers. Keep your existing customers happy and don’t insult them by playing off something old as something new.
Start | Chapter Index | Part 2 →
Is Obama hostile towards big business?
To answer this question, we need to delve a little deeper. Note, I am neither condoning nor praising Obama’s handling of his regulatory efforts. However, I would like to point out certain corrections that do need to be made.
“The truth is that not even the Franklin Roosevelt administration was as hostile to and ignorant about free enterprise as this [Obama’s] administration is.”
–Steve Forbes.
But, is Obama really hostile towards business? Or, is he making needed corrections? There is a fine line here. This issue also points out a serious problem in politics today. That problem is, you guessed it, money. Without money, the world doesn’t work. Without money, candidates don’t get elected. Without money, businesses don’t sell things and make money. Back up the train.. Businesses make plenty of money without governmental help. The trouble is that businesses want to be able to make laws that enable their businesses to make more money and then have the government be lenient with them when issues arise.
The reality, though, is that like the separation of church and state, the government now needs separation of business and state. The two are oil and water, they don’t mix. Government needs to be able to make law without interference from any party. But, businesses have deep pockets and hefty lawyers. These two elements help elect officials and help sway these same officials into making good on promises they made towards these businesses during the election.
Obama’s corrections
While I don’t agree with every single thing Obama has done, I do agree that change is necessary. The change that he is making is intended to correct the issues that led to the economic downturn. The trouble comes with statements from people like Steve Forbes. Mr. Forbes believes that he is the end-all-be-all-know-it-all when it comes to all-things-business. The trouble is, he doesn’t. Yes, he runs a successful magazine, but that doesn’t make him an authority. That makes him a successful business owner.
Obama is walking that fine line. A fine line that shouldn’t even be necessary. But, there it is. The line that’s there to help Obama help the economy, help spur business and growth and reduce the chances of a repeated failure. At the same time, the line is there to show that government values business, but isn’t there to socialize it. The trouble is, this economic downturn was of our own making. By our, I mean Wall Street. The housing bubble was just that, a bubble. Bubbles eventually burst and this bubble was no exception. It’s not as if analysts and intelligent minded people couldn’t see the handwriting on the wall. When the mortgage interest rates got down to 1% and all of those ARM and specialty loans were being issued like water flowing down the Mississippi, trouble was inevitable. We just didn’t know that banks and insurance companies were tying their financial soundness to these extremely risky loans using credit default swaps.
Until the bubble burst, no one really knew just how deep the rabbit hole went. Then, everything came crashing down and all of the nasty subprime mortgage and credit default swap issues came into view in their all fugly detailed glory. The first evidence of that was Bear Stearns followed by AIG (and the subsequent governmental bailout). I still think they should have let AIG fold, I digress.
Government and Business
It’s high time that government distanced itself from corporate businesses. It’s high time congress made laws to separate government from business (including political support). It’s high time that government stopped being a pawn for corporate businesses. Forbes clearly seems to think that Free Enterprise requires socialism to function. Free Enterprise is not part of and does not need socialism. Free Enterprise means that businesses can do whatever they need to do (within the limits of the laws) to make their business succeed. Clearly, there have not been laws enabled that have dramatically impacted Free Enterprise. The laws that have been enacted have been placed there to prevent corporations from producing risky investment vehicles with a high likelyhood of crashing down again. If businesses are now floundering, it’s not because of laws. It’s because corporations have lost their way and are still expecting handouts. Well, you can keep your hand out, but don’t expect the government to be dropping any coin in it.
Corporations have relied, no… depended on the US Government for handouts. That time needs to end. Subsidies for business need to go away. Businesses need to fend for themselves just like Free Enterprise mandates. If a business can’t make it on its own, then let it fail. I’ll repeat, LET IT FAIL. Failure is also part of Free Enterprise. Businesses that will succeed, will succeed because they produce a good product or service. Businesses that fail, will fail because they don’t produce good products or services.
Lost our way
America, and specifically corporate enterprises, have lost their way. For far too long have big corporations depended on favorable governmental conditions (sounds like a weather report) to help them stay in business. Well, that train has left (and must leave). It should be solely up to you and your business practices alone to make or break your company. It is the quality of your products, services and support that makes people want to buy your products or invest in your company. Nothing has changed about this aspect of Free Enterprise.
We need to go back to a time when quality was the key. When providing a superior product was the answer to getting people to buy things. If that also means deflation, then so be it. Businesses need to find their way by learning how to do more with less. How to manage their staff better and stop over-hiring. At the same time, many of them need to stop under-hiring and also value the employees that they have right now.
The key to keeping your business flowing is by keeping your employees active, productive and happy. Morale is a big problem in companies during any downturn. Once fear sets in over the next reduction in force (RIF), then morale falls to all-time-lows. No, taking the employees on an outing doesn’t boost morale. The way to boost morale is to stop RIFing the staff out the door. Yes, I know it gives a temporary boost to the stock price and makes the shareholders happy, but that’s a temporary fix with limited effects. Once the dust settles, the employees who are left become disgruntled, unhappy and produce less. This is completely backwards thinking. Which is why business has lost its way.
Shareholder value vs quality products
I know, someone’s going to say that it is all about ‘shareholder value’. That may be the way things seem now, but it is wrong. Currently accepted actions that lead to improved shareholder value tend to undercut production, stifle innovation, reduce profit margins and lower productivity. Why would you intentionally do this to your business? So, while these measures may seem to help the stock price, it does nothing to help the company improve its quality of products and services. In fact, in the long run, these actions almost always negatively impact the bottom line. So, the fundamental question is, are you in business to make the shareholders happy or are you in business to sell quality products and services? This fundamental question must be answered.
The true answer to this question also shows that Free Enterprise priorities today are all wrong. It used to be that the customer is #1. Now, shareholders are #1 and customers are #2. This is both wrong and stupid. Until businesses go back to the idea that the customer is #1, corporations will continue to fail and need governmental subsidies. While shareholders are considered #1, there is really no such thing as Free Enterprise when it comes to multi-million dollar corporations… which is why they always need a handout from the government.
Business Organization Fail: The failure of the sales pipeline
In my line of business, purchasing services is part of doing business. Unfortunately, many businesses fail at sufficiently managing this budding relationship properly. This time is a crucial in relationship building between the two companies. If the order process does not go smoothly, is delayed or is slow to process or complete, this can damage the relationship from the start. A lot of companies pride themselves on their actual services, but how many company’s pride themselves or tout their order entry and completion processes? Not many.
All too often, you place an order for a service and the order does not complete as you expect. At first, you think this operation should be simple. However, when installation day and time passes without a peep, this leaves you wondering what happened. So, you call the sales and/or customer support line only to find out they don’t have a record of your order. Unfortunately, this is a sign of disorganization. A sign that this company fails to manage the order entry and order pipeline system properly. This is a company that should leave you with the question, “Do I really want to do business with them?” Rightly, you should be asking yourself that question. In some cases, however, this may be a cable company or some other company where you are over a barrel. Defacto monopolies exist in society and there’s little we as consumers can do about that. So, if you want that service, you must purchase it from that company or you don’t get it. But, even with all of that in mind, you should still ask the question, “Should I do business with this company?”
Disorganization is nearly always a sign of things to come. If there is this much disorganization surrounding the installation and the order process, that does leak into other parts of the business including the actual service itself. So, you may find your service affected in random ways throughout the life of the service. These problems may include, unintentional service disconnection, incorrect billing and invoicing including double billing and inaccurate billing to sporadic service quality and uninformed service outages and even installation issues resurfacing months or years later. Disorganization affects far too many businesses. Worse, most businesses don’t even recognize that they are affected, let alone do anything about it. Bigger businesses are more prone to disorganization than smaller companies, but business of all sizes can and are affected. With large companies, the departments and staff get more and more disconnected. As the departments get bigger and more disconnected, employees adopt a ‘not my job’ mentality and once something reaches the limit of their job description, they push it off their desk with no thought to the customer’s relationship. Once it’s pushed off their desk, they don’t really care what happens. This can leave holes that let customers’ orders fall through the crack and not be serviced.
With small businesses, disorganization happens from immature processes and/or constantly shifting priorities. Also with small businesses, these companies are usually understaffed and that leaves the employees overworked. So, instead of the service order falling into a black hole like a larger company, the order simply gets buried on the desk (or in email). This results in lack of order tracking. Effectively, big or small company, the problem is the same: a lost order.
Organizing: Documentation and Communication
Order taking doesn’t have to be a complex process. It does, however, need a process. In large companies, each department needs to be on the same page. So, that means sales, billing, customer support and technical support all need to use the same system to reference order numbers. Having multiple order tracking systems is ripe for failure in the order process. There’s nothing worse than need three or four reference numbers to discuss an order. Worse, though, is when you call and they can’t even look up any of the order numbers and they resort to company names, service addresses and phone numbers. Sometimes these don’t even work. When nothing works to look up your account, that indicates either an incompetent service representative or fractured systems. If you get a service rep who can’t seem to find your order, ask them for their name, thank them and call back. When you get a new representative ask them to look up your order or company. If they immediately find it, you should report the previous representative to their supervisor. Representatives can sometimes intentionally prevent finding the company to get you off the phone faster. These need to be reported.
Companies must recognize disorganization in order to fix it. Without recognizing this issue, the company cannot change their internal processes. The processes must be streamlined from start to finish. This is why many businesses adopt and use ISO 9000 standards certifications. These certifications, while rigorous and somewhat costly to obtain and somewhat costly and rigorous to maintain, ensure a high quality customer experience from start to finish. These certifications require that every department follow a blueprint each time they interact with customers. A set of steps that always lead the customer through the same experience. It sets quality standards from services and products and, again, it overall ensures a high quality customer experience.
Many larger companies require ISO certifications of their vendors. This certification process ensures there is a commitment of quality and a level of organization associated with a company’s service offerings. In other words, ISO certification immediately tells would-be buyers that they can expect a certain level of quality. ISO certifications require each employee to write their processes down of how to properly work through their daily jobs. Once these processes are documented, it’s easy to hand the documentation to new staff and have them follow these standards. Standards set by a company ensures that products and services are efficiently provided. Without any standards in place, this quickly leads to disorganization and haphazard and random methodologies in placing and managing the order process. Without standards and processes in place, a company cannot provide high quality services as easily or consistently.
Communication with prospects is key to an order’s success. If there is an issue with an order, there needs to be someone in the organization to manage these delays. Someone should be tasked with keeping track of orders and managing (by contacting the customer) when there is to be a delay or an unexpected issue that may prevent an order from completing properly. So, on top of the processes in place to make sure orders always take the same path, there needs to be a person to manage the order fully from start to finish. Additionally, systems need to be interlinked properly so that Sales, Customer Service and Billing can be on the same page at the same time. There is nothing worse than calling in and asking about the progress of an order only to find out the order was cancelled from lack of communication.
American Idol: Failure to launch (artists)
While I understand the hype about this series (the competition and all), I don’t really understand why this show continues to exist. Yes, we go through each season and whittle down contestents to the final two. But, after the winner is chosen, then what? Oh yeah, they get a recording contract. What happens after that?
Spotting Commercial Viability
The ‘judges’ (and I use this term loosely) seem to think they know what’s best in the ‘pop music biz’. Frankly, if they could discover real talent, they would be working for a record company locating and signing talent right and left and not hosting a silly variety hour show. But, here we are… and here they are. So, I must honestly question the sincerity and realism of this show. The whole thing is staged, yes, to find someone who can sing. But, it’s really there as a money maker for whomever is producing that show. The underlying values aren’t to get someone signed to a contract. The real point is to put on a show. And, thats what they do, for better or worse.
Judges
It’s funny that they pick judges who are has-been recording artsts and supposedly A&R people like Simon Cowell. What’s funny about Simon is that his ability to pick talent has been extremely spotty. For example, he signed and produced Westlife. Westlife is a boyband that’s a meager shadow of N*Sync and The Backstreet Boys at best. What’s even more funny is that THAT is really his BEST claim to talent selection outside of Idol. Every other artist beyond that isn’t even worth mentioning.
So, how do these washed-up has-beens end up judging a show that supposedly prides itself on selecting quality talent? Well, let’s examine Idol more closely.
Winning Contestants
Since 2002, there has been (in order), Kelly Clarkson, Rubin Studdard, Fantasia Barrino, Carrie Underwood, Taylor Hicks, Jordin Sparks, David Cook and Kris Allen (most recently). Arguably, the biggest name to come out of the Idol circle is Kelly Clarkson with Carrie Underwood as a solid second. The rest, well, what about them? They may have produced records, but few appear to be listening. This isn’t a good track record for Idol.
Let’s consider Kelly Clarkson for a moment. Even she has had her ups and downs (mostly downs). While Kelly has a resonably strong voice, the question remains just how commercially viable it is. With a name like American Idol, you’d think that Kelly Clarkson would have taken the pop crown away from the likes of Madonna and Britney. Yet, while Madonna’s star is fading, Britney has taken the crown over and firmly holds it as far as pop acts go. Britney wasn’t even ‘discovered’ on Idol. More than this, Kelly has a stronger voice than Britney, yet you see what that gets you. Kelly isn’t even close to being in Madonna’s league and, while Britney has her own personal issues, her music producers provide a much better music experience than most of Kelly’s efforts.
Outside of these ‘winners’, we also have non-winners like Jennifer Hudson (who’s at least as well known as Kelly Clarkson and she wasn’t even a runner-up) and she’s also an overall more complete ‘star’ than Kelly. Then there’s David Archuletta, Chris Daughtry and Clay Aikin. These four people are the proof that the judges cannot pick winners. In fact, these 4 people should have won Idol, but didn’t. Yet, they are still successful on their own.
Track Record
Just looking at Idol’s track record, you can see more of the Idol winners have failed to be commercially viable than have been successful (Fantasia who? Jordin who? David who? Rubin who? Taylor who?). The point here, that the judges clearly are not capable of spotting talent. Even when someone has real singing talent, is young and good looking, clearly that’s not everything that’s needed. Otherwise, everyone graduating from Idol would have become an instant success… which, of course, has not happened.
I understand the fervor over this show and I understand that the point in watching is more about the competition than the outcome. But, isn’t the outcome why we come to watch? Don’t we actually expect the winner to become popular, make great music and usurp the pop crown from Britney? After all, that’s what Idol started out promising.
Idol is Flawed
The premise of Idol is flawed. The barometer by which they choose winners is in versatility in singing already commercially successful songs. The real barometer of talent is both in songwriting and performing. Even though someone has a great singing voice, that doesn’t automatically make them a pop sensation. Becoming a ‘Pop Idol’ comes with singing unique new songs. Songs that have not been heard before. Better yet, it proves talent when the person can both write and sing their own music. Artists like Prince and Sarah McLachlan are capable of this. To me, this is talent worth finding. But, today, commercial pop music is more about the look and voice than it is about songwriting. Music producers are far too prone to run to Taxi and buy a song or commission their favorite songwriter to write a song rather than having the singer write something.
For me, Idol would be a much more rounded show if they actually required the singers to also write all of their own material. This would be a lot more time consuming, but requiring this would also show the true talent of the artist. This premise would show a contestant’s ability to write music under pressure and, at the same time, perform that music admirably. Using this model in the show would likely have changed both the contestants in the show and the outcome of the winners. I would also have a lot more respect for the winners of the show. I also believe the winners would have been far more commercially viable as artists than anyone Idol has, so far, produced.
Idol’s days are numbered
We are now going into the 9th season and I believe this show is wearing out its welcome. Talent shows like this do come and go, so I expect this show go packing probably in one to two seasons. If it lasts beyond 10 seasons, I’d be highly surprised. I’m honestly surprised that it has survived this long with its dismal track record of spotting viable commercial talent. Yes, the winners can sing, but can they produce an album that people want? In 8 seasons, I’d say the answer to that question is unequivically no. The spectacle of the live performance is great, but it doesn’t mean the contestant has what it takes to succeed in the music business. Clearly, Idol has failed at it’s primary goal.
Random Thoughts - Randocity! 
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